Las Vegas Is a Much Different Market Than It Was in 2008

Las Vegas is a much different market than it was in the last cycle, and it means longevity and better protection against a recession. There are handful of reasons the market is stronger today, including better workforce dynamics, new economic drivers and new capital players in the real estate market that have helped to catalyze more growth.

“Since the last recession, the emergence and penetration of institutional ownership has instilled an enhanced level of dependability on the market. Blackstone’s purchase of the Bellagio is an excellent example,” Eytan Peer, VP of acquisitions at Oak Residential Partners, and active buyer in Las Vegas, tells GlobeSt.com. “Fundamentals have changed significantly since the start of this most recent cycle. The culmination of several dynamics are the primary reasons Las Vegas is more protected this cycle, than previous.”

Las Vegas has a lot going for it, but at the heart of its growth is a pro-business and attractive tax environment, which has helped it capture companies and residents from neighboring California. “A favorable and pro-business tax environment is another one of the major factors promoting Las Vegas’s fortified growth,” says Peer. California’s restrictive tax policies, reducing the amount of total deductions for local residents as well the generally high property tax rates have boded well for Vegas. This contrasted low-tax, pro-business label was forming during the last cycle, but was sidetracked as a result of the downturn. It’s finally  picked up where it left off and is now fueling the diversified business climate, supporting a more stable long term outlook.”

This pro-business environment has helped fuel a new kind of job growth in the market. Much different from the market dynamics in 2008, Las Vegas now has a diversified labor force, which will help protect a major impact during the next recession. “During the last cycle a large component of the labor force was comprised of short-term, construction jobs, which were highly sensitive to the health of the national economy,” says Peer. “At present, the amount construction employment is half of what it was at its peak, while the employment base is significantly larger.”

As a result, investors are finding opportunities across asset classes. “While the economy is still heavily dependent on tourism and hospitality, we’ve seen tremendous growth in healthcare, as an aging population has migrated away from California into more cost-effective and affordable destinations such as Las Vegas; industrial, which, especially when considering trade and logistics, is nearly demanded as much as multifamily; and technology, which has had a 35% in its labor force over the last five years,” says Peer.

The biggest change in Las Vegas, however, isn’t exclusive to the market, but to the real estate industry as a whole. “The excessive subprime lending, which led to oversupply during the last cycle, doesn’t exist in today,” says Peer. “The single-family housing market is currently being driven on market fundamentals. Tempered single-family home construction, as well as increased labor and input costs, will act as governance for overall levels of housing supply and prevent market saturation.”